53
TRADE FINANCE Summer project report submitted in partial fulfillment of the requirements for the Post graduate diploma in management. SUBMITTED BY: TUSHAR YEMDEY Roll No. - 91 PGDM 2014-16 Supervisors: Company guide : Mr. Swetang Shah (CFO) Alumni guide : Mrs. Akepati Prashanthi Faculty guide : Mr. Chetan GK KIRLOSKAR INSTITUTE OF ADVANCED MANAGEMENT STUDIES, HARIHAR, KARNATAKA (PGDM-2014-16)

Tushar Yemdey (91)

Embed Size (px)

Citation preview

Page 1: Tushar Yemdey (91)

TRADE FINANCE

Summer project report submitted in partial fulfillment of the requirements for the

Post graduate diploma in management.

SUBMITTED BY:

TUSHAR YEMDEY

Roll No. - 91

PGDM 2014-16

Supervisors:

Company guide : Mr. Swetang Shah (CFO)

Alumni guide : Mrs. Akepati Prashanthi

Faculty guide : Mr. Chetan GK

KIRLOSKAR INSTITUTE OF ADVANCED MANAGEMENT STUDIES, HARIHAR, KARNATAKA

(PGDM-2014-16)

Page 2: Tushar Yemdey (91)

Page 1 of 53

ACKNOWLEDGEMENT

“THE BEST PART OF ANY JOURNEY IS ITS BEGINNING”

An internship program is a golden opportunity for learning and self-development before stepping in to

the actual corporate world. It nurtures one’s already existing skills to explore the real and professional

environment, also providing a plate form to acquire some more technical and social skill. But at this

stage of understanding, it is often very difficult to understand a wide spectrum of knowledge without

proper guidance and motivation.

I take this opportunity to express my deep sense of gratitude to ESSAR STEEL INDIA LTD. For

providing me a plate form to work as an intern in their regional office, Hazira, Surat, Gujrat for a period

of 50 days. Also I would like to thank my project guide Mr. Swetang Shah (CFO), Mr. Bhavesh

Modi (DGM) & Mr. Sanjay Rohit (Manager) for giving their guidance, insights and encouragement

which acted as a continuous source of support for me during this period.

The successful completion of this project has been attain with the contribution of Mr. Nitin

Maheshwari, Mr. Dinesh Rajan, & Mr. Nilesh Desai for providing me the necessary information to

carry out the research and other valuable inputs to quench my quires etc.

Words of inadequate to offer my profound gratitude to my institution kirloskar institute of advanced

management studies, our directors – CNN Narayana and Dr. Janaki Naik for their cooperation and

providing an opportunity for SIP in respective company. I am deeply indebted to my faculty guide –

Prof. Chetan GK and Alumni guide – Mrs. Akepati Prashanthi for their constant inputs, suggestions,

valuable feedbacks and guidance throughout the tenure of the project.

At last, I would also like to thank the known and unknown staff member of the company for sharing

their knowledge and their valuable time to carry out the research.

TUSHAR YEMDEY

PGDM 2015-16

Page 3: Tushar Yemdey (91)

Page 2 of 53

Table of Content

Sr. No. TITLE Pg. No.

1 Executive Summary 3

2 Introduction 4

3 Objectives of study 4

4 Brief description of concept

4.1 Working capital 5

4.2 Trade Finance 7

4.2.1 Fund Based 11

4.2.1.1 Cash Credit 11

4.2.1.2Bill Discounting 12

4.2.1.3Export Packing Credit 13

4.2.2 Non-fund Based 14

4.2.2.1 Letter of Credit 14

4.2.2.2 Bank Guarantee 28

4.2.2.3 Buyers Credit 29

5 Cash Against Delivery 31

6 Balance Sheet 32

7 Ratio Analysis 34

8 PCFC 36

9 Brief about the Industry 38

10 Methodology 46

11 Tabulation and finding 47

12 Scope for future improvement 48

13 Conclusion 48

14 Recommendation 49

15 Limitation of Study 49

16 Appendices 50

17 Bibliography 51

Page 4: Tushar Yemdey (91)

Page 3 of 53

Executive Summary

Working capital means the cash available for day-to-day running of the business. Working capital

represents the liquidity available to a business.

Trade finance refers to the various forms of financial support and financial transactions used in

international and domestic trade.

Trade finance means buying and selling of the goods in international as well as in domestic. In this we

will see how buying and selling is done and what all the documents are needed to sell or buy the goods,

the way of preparing the documents and their process and to know about the importance of every

documents. I learned the procedure and details of the entire document related to trade finance.

This is the way in which a seller requires a buyer to prepay for goods ship. The buyer wants to reduce

his risks by asking the seller for document of the goods that have been shipped. To reduce the risks of

payment for the seller, he asks various instruments like: Letter of Credit, Bank Guarantee, Buyers

Credit etc. by which the payment risks is reduce, as this instruments are issued by the bank or any

financial institution so they become a third party guarantor. If the buyer is unable to make payment to

the seller than the bank or financial institute will makes payment on be-half of buyer. The bank or any

financial institute deals only with the documents not with the goods or services.

Work of trade finance manager is to balance both Liquidity & Profitable. There should always be cash

with the company so that the work of the company didn’t stop. You have to invest in every part of the

trade cycle to get the operation move on.

Page 5: Tushar Yemdey (91)

Page 4 of 53

Introduction

The project is carried out as a part of Summer Internship Program of 2nd year academic curriculum for

Master of Business Administration (MBA). The title of the project is ‘TRADE FINANCE’ has been

suggested by my company guide after a discussion done through personal sessions. The project throws

a light on how Trade Finance works and how to prepare the documentation which is major work being

carried out daily by the Trade Finance department. This project captures in depth explanation of various

topics/documents included along with the unique practices followed at ESSAR.

Every document has its own importance and value. Some of the documents are prepared by the

additional requirement of the importer.

Objective of the Study

To learn about the mechanism of Trade Finance.

To know about the working of Trade Finance.

Learn about the various forms of Trade Finance.

Page 6: Tushar Yemdey (91)

Page 5 of 53

Working capital is the cash available for the day-to-day running of the business. Working capital

represents the liquidity available to a business. Poor working capital management can compromise a

company’s eligibility for business loans, and damage its ability to attract potential investors. Working

capital management: it is the administration of current assets and current liabilities. Effective

management of working capital ensures that the organization is maximizing the benefits from net

current assets by having an optimum level to meet working capital demands.

It is difficult trying to achieve and maintain an optimum level of working capital for the organization.

For example: having a large volume of inventories will have two effects, firstly there will be stock

outs, so therefore the customers are always satisfied, but secondly it means that money has been spent

on acquiring the inventories, which is not generating any profit, and keeping high inventory is not good

for any company as there are also additional costs of holding the inventories (i.e. warehouse space,

insurance etc.).

The control of working capital is ensuring that the company has enough cash in its bank. This will save

on bank interest and charges on over draft.

Less Liquidity = More Profitable

More Liquidity = Less Profitable

Work of trade finance manager is to balance both Liquidity & Profitable. There should always be cash

with the company so that the work of the company didn’t stop.

You have to invest in every part of the trade cycle to get the operation move on.

Buying a machine and not having money to buy the raw material, than there is no use of that machine.

And if you don’t have money than bank doesn’t provide loan to you.

Every business needs investment to procure fixed assets, which remain in use for a longer period.

Money invested in these assets is called ‘Long term Funds’ or ‘Fixed Capital’. Business also needs

funds for short-term purposes to finance current operations. Investment in short term assets like cash,

inventories, debtors etc. is called ‘Short-term Funds’ or ‘Working Capital’. The ‘Working Capital’ can

be categorized, as funds needed for carrying out day-to-day operations of the business smoothly. The

management of the working capital is equally important as the management of long-term financial

investment.

Page 7: Tushar Yemdey (91)

Page 6 of 53

Every running business needs working capital. Even a business which is fully equipped with all types

of fixed assets required is bound to collapse without

(i) Adequate supply of raw materials for processing;

(ii) Cash to pay for wages, power and other costs;

(iii) Creating a stock of finished goods to feed the market demand regularly; and,

(iv) The ability to grant credit to its customers.

All these require working capital. Working capital is thus like the lifeblood of a business. The business

will not be able to carry on day-to-day activities without the availability of adequate working capital.

The diagram shown will clarifies it:

Working Capital Cycle -

The working capital cycle measures the time between paying of goods supplied to you and the final

receipt of cash to you from their sales. It is described to keep cycle as short as possible as it increase the

effectiveness of working capital.

Cash

Trade payables money owing to suppliers as stock purchase on credit

Trade Receivables customer owing money, as sales made on credit

Inventories Sold on credit

Page 8: Tushar Yemdey (91)

Page 7 of 53

Right from the ancient times when barter was the only form of trade, as there was no money to make

profit; trade has gone through a number of changes, both monetarily and technologically. If we include

barter in traditional forms of trade and compare it with modern forms of trade such as buying and

selling products on the internet, we find a host of differences between the two. Not getting to see the

face of the shop owner, choosing product on one’s own and getting it billed electronically is another

important difference between traditional and modern trades.

A barter system is an old method of exchange. This system has been used for centuries and long before

money was invented. People exchanged services and goods for other services and goods in return.

Today, bartering has made a comeback using techniques that are more sophisticated to aid in

TRADING; for instance, the Internet. In ancient times, this system involved people in the same area,

however today bartering is global. The value of bartering items can be negotiated with the other party.

Bartering doesn't involve money which is one of the advantages. You can buy items by exchanging an

item you have but no longer want or need.

A seller needs a buyer to sale the goods. The sellers wants to reduce the risk of payment by asking

buyer the Letter of Credit, And the buyer reduce its risk by asking seller for document of the goods

Page 9: Tushar Yemdey (91)

Page 8 of 53

which have been shipped. The buyers bank assists by providing a LC to the seller providing for

payment upon presentation of certain documents, such as bill of lading. It is useful to know that bank

only deals with the documents, not with the actual goods or services. The function of trade finance is to

act as a third party to remove the payment risk and the supply risk.

Providers of Trade Finance

Trade finance signifies financing for trade, and it concerns both domestic and

international trade transactions. A trade transaction requires a seller of goods and services as well as a

buyer. Various intermediaries such as banks and financial institutions can facilitate these transactions

by financing the trade.

A seller needs to mitigate the payment risk from the buyer and it would be in there benefit to accelerate

the receivables. On the other hand the buyer wants to mitigate the supply risk from the exporter and it

would be in there benefit to receive extended credit on their payment. The function of trade finance is

to act as third party to remove the payment risk.

Page 10: Tushar Yemdey (91)

Page 9 of 53

Users of Trade Finance

Companies involved with trade finance

Seller and Buyer Bank and Financial Institution Insurers and export credit

The risk to the buyer is that the seller may simply pocket the payment and refuse shipment, if the seller

extends credit to the buyer, buyer may refuse to make payment or delay it. The solution to this problem

is through a Letter of Credit, which is opened in the seller’s name by the buyer through a bank. The

letter of credit essentially guarantees payment to the exporter upon receipt of documents proof that the

goods have been shipped.

Page 11: Tushar Yemdey (91)

Page 10 of 53

As their name suggested in fund based finance they give liquid money and in non-fund based finance

they only give guarantee to the creditors of the company.

Among the fund based finance cash credit, export packing credit charge high interest rate because bank

gives hard cash to the company. While export credit charge low interest rate because it increases the

foreign exchange with the bank.

These instrument i.e. letter of credit, buyers credit and bank guarantee in category of non-fund bases,

does not provide any money to the company but it give guarantee on behalf of the company.

Working Capital

Fund Based

Cash Credit

Bill discounting

Non-Fund Based

Letter of

Credit

Bank Guarantee

Export Packing Credit

Buyers Credit

Page 12: Tushar Yemdey (91)

Page 11 of 53

FUND BASED:-

1. Cash Credit –A short term cash loan for the company. The working capital funds are

generally required for purchase of raw materials, stores, fuel, for payment of labor, power

charges, for storing finished goods till they are sold out & for financing the sales by way of

sundry debtors / receivables. Cash Credit facility is granted to the customers to bridge working

capital gap. A Cash Credit is a type of loan account provided by banks under corporate solution

which helps to support working capital requirement. As the business requirements changes daily

so is the working capital.

Documents required obtaining cash credit:

i. Address Proof

ii. Business Proof

iii. Business Profile on Company’s Letterhead.

iv. Certificate of incorporation

v. Last three years Trading, Profit & Loss A/c. and Balance Sheets (duly signed by a Chartered

Accountant).

vi. If existing loan, then sanctioning letter and repayment schedule of the same.

vii. Firm/Company’s PAN Cards.

viii. SEBI formalities in case of listed companies. Etc.

Advantages of cash credit:

As per the new guidelines of RBI, interest is charged on daily basis on the closing balance. Under this

arrangement the interest is charged on the utilized amount and not on the limit amount.

Disadvantages of Cash Credit:

i. The rate of interest charged by loan on cash credit is very high.

ii. Such loan is granted by bank on the basis of company’s turnover, its financial status, value of

inven­tory, etc.

Page 13: Tushar Yemdey (91)

Page 12 of 53

2. Bill Discounting -Bill Discounting is a process where the bank gets the bill of exchange

before its maturity date and below its par value. The amount or cash realized may vary

depending upon the number of days until maturity and the risk involved. Discounting the bill of

exchange is practiced to get the same immediately en-cashed before the maturity date.

The amount of the discount will depend on the amount of time left before the bill matures.

The bills of exchange is an instrument is writing, containing an unconditional order, signed by

the maker, directing a certain person to pay a certain sum of money, only to, or to the order of, a

certain person, or to the bearer of that instrument”

Goods can be sold or bought for cash or on credit. When goods are sold or bought for cash,

payment is received immediately. On the other hand, when goods are sold/bought on credit the

payment is deferred to a future date. In such a situation, normally the firm relies on the party to

make payment on the due date. But in some cases, to avoid any possibility of delay or default,

an instrument of credit is used through which the buyer assures the seller that the payment shall

be made according to the agreed conditions.

The maturity of a B/E is defined as the date on which payment falls due.

Normal maturity periods are 30, 60, 90 or120 days.

Bills maturing within 90 days are most popular.

A bill of exchange must be in writing.

It is an order to make payment.

The order to make payment is unconditional.

The maker of the bill of exchange must sign it.

The payment to be made must be certain.

The date on which payment is made must also be certain.

The bill of exchange must be payable to a certain person.

The amount mentioned in the bill of exchange is payable either on demand or on the expiry of a

fixed period of time.

Discounting of B/E Holder of an accepted B/E has two options

1. Hold on to B/E till maturity and then take the payment from the buyer.

2. Discount the B/E with discounting agency. The act of handing over an endorsed B/E for ready

money is called discounting the B/E. The margin between the ready money paid and face value of the

bill is called the discount

Page 14: Tushar Yemdey (91)

Page 13 of 53

3. Export Packing Credit -'Packing credit' is a loan or advance granted to an exporter for

financing packing of goods prior to shipment. Packing credit can also be extended as working

capital assistance to meet expenses such as wages, utility payments, travel expenses etc. to

companies engaged in export. Packing credit is sanctioned on the basis of letter of credit or a

confirmed and irrevocable order for the export of goods from India.

The main purpose of packing credit is to meet working capital requirements before shipment of

goods, such as processing expenses, packing expenses.

The interest rate of Packing Credit is less than Overdraft & Cash Credit.

Period: The packing credit is provided for a period of 180 days Additional 180 days

credit may be provided.

Factor to consider when choosing an export payment method:

1. Your relationship with your customers.

2. The economic condition in the country to which you are exporting.

3. Currency adjustment factor.

4. Customers credit worthiness.

5. Terms that your competitors are offering.

6. Suppliers demand.

Page 15: Tushar Yemdey (91)

Page 14 of 53

Non-Fund Based:

1. Letter of Credit -Letters of credit (LC) are among the most secure instruments available to

international trade. An LC is a commitment by a bank on behalf of the buyer that payment will

be made to the exporter provided that the terms and conditions have been met according to

Letter of Credit.

Letter of Credit LC also known as Documentary Credit is a widely used term to make payment

secure in domestic and international trade. The document is issued by a bank at the buyer

request. Buyer provides the necessary documents for issuing the LC.

All Letter of Credits for export import trade is handled under the guidelines of Uniform

Customs and Practice of Documentary Credit of International Chamber of Commerce (UCP

600).

Points covered in UCP 600 guidelines:

Serial

No.

Article Area Consisting

1. 1 to 3 General Application, Definition and Interpretations

2. 4 to 12 Obligations Credit vs. Contracts, Documents vs. Goods, issuing bank undertaking, confirming bank undertaking, advising of credit amendment, nomination

3. 13 to 16 Liabilities and

responsibilities.

Reimbursement, Examination of Documents, Complying, Presentation, Handling Discrepant Documents

4. 17 to 28 Documents Original documents & copy, commercial invoice Bill of Lading, Chapter Party Bill of Lading, Air Documents, Road Rail etc. Documents, Courier, Postal etc. Receipt. On board, Shippers' count, Clean Documents, Insurance documents

5. 29 to 33 Miscellaneous

Provisions

Extension of dates, Tolerance in Credits, Installment Drawings or Shipments, Partial Shipment and Drawings. Hours of Presentation

6 34 to 37 Disclaimer Effectiveness of Document Transmission and Translation Force Majeure Acts of an Instructed Party

7 38 & 39 Others Transferable Credits Assignment of Proceeds

Page 16: Tushar Yemdey (91)

Page 15 of 53

Types of letter of Credit:-

1. Revocable Letters of Credit -Revocable letter of credit can be modified or cancelled by

the issuing bank after its issuance at any moment without seeking the beneficiary's consent.

Revocable letters of credit give issuer the cancellation right of the credit any time without prior

notice to the beneficiary. Since revocable letters of credit do not provide any protection to the

beneficiary, they are not used frequently. A revocable letter of credit can serve as a limited

security payment method to the beneficiaries because they are subject to amendment or

cancellation without their prior knowledge. As a result revocable letters of credit are not used

frequently in international trade.

2. Irrevocable Letters of Credit -An irrevocable letter of credit cannot be canceled or

modified in any way without the consent by the exporter & importer.

We can define an irrevocable letter of credit as a type of documentary credit which cannot be

cancelled or amended by the issuing bank without the agreement of the parties of the letter of

credit transaction. Irrevocable letter of credit term is one of the most frequently seen LC in

international trade finance world.

3. Advance Payment Letters of Credit -Letter of credit that carries a provision which

allows a seller to draw up to a fixed sum from the advising bank, in advance of the shipment or

before presenting the prescribed documents.

4. Sight Letters of Credit -Under a sight letter of credit, payment is made to the seller

immediately after the required documents have been submitted to the authorized bank, provided

the conditions in the letter of credit have been met. Banks are, however, allowed a reasonable

period of time for checking purposes (not more than five working days after they receive the

documents). A letter of credit that demands payment on the submission of the required

documents. The bank reviews the documents and pays the beneficiary if the documents meet the

conditions of the letter

Page 17: Tushar Yemdey (91)

Page 16 of 53

5. Back to Back Letters of Credit -A letter of credit which is commonly used in a

transaction including an intermediary. There are two letters of credit, the first issued by the bank

of the buyer to the intermediary and the second issued by the bank of intermediary to the seller.

Application 1

Contract LC 1

LC 1

Application 2

Contract LC 2

LC 2

There are two separate underlying contracts here. The first contract is between the Buyer and the

Agent. The Agent then sources the supply of the goods and issues a second contract to the Supplier. It

is vitally important that the terms of both of these contracts comply with each other. Once the contracts

are in place, the Buyer will forward an application for the issuance of a Letter of Credit to his Bank,

and they, in turn, will issue the Letter of Credit in favor of the Agent through his Bank. Once this has

been received and checked against the terms of the first contract, the Agent will forward his own

application for the issuance of a second Letter of Credit to his Bank who will issue the second Letter of

Credit in favor of the Supplier through his Bank.

Buyer Buyers Bank

Agent Beneficiary Beneficiaries Bank

Agent Applicant Applicants Bank

Sellers Bank Seller

Page 18: Tushar Yemdey (91)

Page 17 of 53

Advantages of Letter of Credit:

1. Reduce the risk of payment by importer.

2. LC provides a security to exporter.

3. An exporter can avail pre-shipment finance from banks.

4. Finance at right time.

5. Reduces the risk of non-performance by the supplier

6. The credit risk is transferred from the buyer to the issuing bank, which is obligated to pay even

if the buyer goes bankrupt.

7. Security that payment is not made until the documents confirm to the terms and conditions of

the credit.

8. Seller can access new and emerging markets since the risk of non-payment are borne by

confirming bank.

Disadvantages of Letter of Credit:

1. Fluctuation of currency.

2. Discrepancies in documents.

Theory of getting future dollar rate:

1. Interest rate parity:

For example: interest in India of Loan is 8% p.a and in USA is 3% p.a.

Rate of 1$ = RS.60.

Loan amount:

USA INDIA

100 6000

3% 8%

After 1year - 103 6480

Than 6480/103 = 62.91

It means after 1 year the dollar rate will be 62.91

Amendment on LC: Amendment means any correction to be done in Letter of Credit. It can be the

correction of value, date, place etc. in this we can extend the credit period by asking the amendment

from importer.

Transshipment: where there is no direct air, land, or sea link between the consignor's and

consignee's countries or where the intended port of entry is blocked, or the ship is not havingthe license

to enter on that country than the goods are transferred to other vessel to complete the shipment.

Transshipment is allowed or not is written on Letter of Credit.

Page 19: Tushar Yemdey (91)

Page 18 of 53

How Letter of credit works?

CONTRACT

EXECUTION

EXPORTER CONTRACT IMPORTER

ISSUING BANK ADVISORY BANK SEND LC

AUTHONTICATE

DOCUMENTS

APPLYING

FOR LC

EXPORTER IMPORTER

ISSUING BANK ADVISORY BANK

SHIPMENT

PAYMENT REALEASE

DOCUMENT PAYMENT

SUBMIT

DOCUMENT

SEND DOCUMENTS

PAYMENT

01

02

03

04

05

11

05

10

05 07

05

08

05

06

05

09

05

Page 20: Tushar Yemdey (91)

Page 19 of 53

Steps of LC:

Steps1.

There is a contract between exporter & importer.

Steps2.

Importer applies for LC in his bank which is known as issuing bank.

Steps3.

LC is send to the exporter’s bank which is known as advisory bank.

(NOTE – issuing bank and advisory bank can be same also.)

Steps4.

The advisory bank will tell to the exporter to authenticate the documents as written on LC.

Steps5.

As the goods are produced it is shipped to the importer.

Steps6.

As the shipment is done the documents are send to the advisory bank.

(NOTE – Documents should be send within 21 days of shipment)

Steps7.

Advisory bank sends the documents to the issuing bank.

Steps8.

After receiving the documents by issuing bank it makes payment to the advisory bank.

Steps9.

The advisory bank makes payment to the exporter.

Steps10.

Importer makes payment to the issuing bank.

Steps11.

Issuing bank release the documents to the exporter after receiving the payment.

Page 21: Tushar Yemdey (91)

Page 20 of 53

How long is the credit period under the Letter of Credit? Tenure of LC is depending on the mutually agreed terms & condition by importer & exporter. For

example: 30, 60, 90, 120 days. But according to the government regulation credit period should not

exceed 180 days.

Every bank has a different format of the Letter of Credit.

One of the formats of Letter of Credit is below.

Page 22: Tushar Yemdey (91)

Page 21 of 53

Page 23: Tushar Yemdey (91)

Page 22 of 53

Page 24: Tushar Yemdey (91)

Page 23 of 53

Page 25: Tushar Yemdey (91)

Page 24 of 53

Page 26: Tushar Yemdey (91)

Page 25 of 53

Page 27: Tushar Yemdey (91)

Page 26 of 53

Page 28: Tushar Yemdey (91)

Page 27 of 53

Page 29: Tushar Yemdey (91)

Page 28 of 53

2. Bank guarantee: Bank guarantee is a standby of letter of Credit. A bank guarantee is a

promise from a bank or other lending institution that if a particular borrower defaults on a loan,

the bank will cover the loss. Note that a bank guarantee is not the same as a letter of credit.

Bank Guarantee is an instrument issued by the Bank in which the Bank agrees to stand

guarantee against the non-performance of some action or performance of a party.

The guarantee is issued upon receipt of a request from applicant for some purpose in favor of a

Beneficiary. The 'issuing bank' will pay the guarantee amount to the beneficiary. Bank

guarantee is done on a stamp paper.

Bank Charges: Around 1-2% on Bank Guarantee.

Types of Bank Guarantee:

1. Advanced Bank Guarantee: In this type of Bank Guarantee advance payment is done to

the vendor. Payment can be of 10% or 100% depend on the agreement between the importer

and exporter. Before the expiry date goods should be shipped and received. As the goods are

received by the importer the remaining amount is paid.

2. Performance Bank Guarantee: In this type of Bank Guarantee full payment is done after

receiving of goods. After that there is a time period of material performance for example: 2, 3, 6

months depends on the agreement made by importer and exporter. If the goods not performed

well before the expiry of PBG than the payment will be return to the importer.

Advantages of Bank Guarantee:

1. Low interest rate.

2. Bank guarantee is on performance for goods also.

Disadvantages of Bank Guarantee:

1. Non-negotiable instrument.

2. Payment is received at the end only.

Page 30: Tushar Yemdey (91)

Page 29 of 53

Difference between Letter of Credit & Bank Guarantee? Sr. No. Letter of Credit Bank Guarantee

1. Letter of credit is a negotiable instrument. Bank Guarantees a non-negotiable instrument.

2. Letter of credit amount can be discounted Bank Guarantee amount cannot be discounted

3. In Letter of Credit you get the payment

before the due date.

In Bank Guarantee you have to wait till due

date to get the payment.

3. Buyers Credit: Buyer's credit is a short term credit available to an importer from overseas

lenders such as banks, for goods they are importing. The overseas banks usually lend the

importer based on a bank guarantee issued by the importer's bank. A Buyers Credit is a foreign

fund made available to an importer by a Bank to meet the payment of the importer to his

exporter.

How Buyers Credit Works? Firstly, the importer will see that which bank will provide the fund in low interest rate.

For example, Bank of India (New York) provides the fund in low interest rate, suppose our bank is

IDBI Bank.

Work of BOI: BOI (NY) will give the documents to IDBI:

1. Offer letter

2. LUT (Letter of Undertaking) format.

3. Copy of Invoice & BL

4. IT - NOC

5. Buyers Credit request.

Work of IDBI:

1. IDBI will check all the documents send by the BOI (NY) and issue a LUT according to their

format given and send to BOI (NY).

2. After receiving LUT to BOI (NY) he will release the fund to IDBI Bank.

3. After receiving the fund payment is directly or through SBI (in ESSAR).

4. Importer has to pay the principle amount + interest to IDBI Bank before the due date.

5. IDBI Bank will pay the amount to BOI (NY).

Page 31: Tushar Yemdey (91)

Page 30 of 53

LUT ISSUE

BOI (NY)

FUNDING

IDBI

Direct Payment Through SBI

Contains in Offer Letter:

1. LC No. / Invoice No. / Shipment Date

2. Amount in USD.

3. Due Date.

4. Period of Financing.

5. Extended Maturity Date.

6. Financing Rate.

7. Other Terms & Condition of the Banks.

Benefits • Available in all convertible currencies.

• Since the rate of interest is linked to LIBOR, the financing costs can be significantly lower than

the cost of local borrowings.

• Importers can make use of the multi-currency option by availing of a buyer’s credit in a

currency other than the one in which goods are invoiced to take advantage of differentials in

interest rate.

• Buyer’s credit can be arranged irrespective of the mode of import i.e. L/C, collection or direct

imports.

Contains in Letter of Undertaking: 1. Name of the Importer.

2. Address

3. Seller name and address.

4. Seller Bank

5. BL No. and date.

6. Description of good & Price.

7. Whether Capital Goods

8. Country of Origin of Goods

9. Tenure of the Buyers Credit

10. Amount of Buyers Credit

11. Interest Rate

12. Maturity date of the Buyers Credit

13. Commitment by the Bank.

Page 32: Tushar Yemdey (91)

Page 31 of 53

Cash against Delivery:

Cash against delivery is done when there is a good relation between importer and exporter.It carries low

interest rate than LC.

In case buyer refuse to take the goods after the shipment by exporter, than the goods is taken by the

bank and it is been auction in the market. And whatever the money get by auction is paid to the

exporter.

Advantages of CAD:

1. No use of bank credit line.

2. Low cost.

Disadvantages of CAD:

1. Refusal of the buyer to take possession of documents and goods.

2. No bank guarantee of payment.

3. Once payment has been made, he cannot reclaim the funds.

1. Commercial Contract

Goods Shipment

4.

5.

7.

2.

3.

.

6.

Steps:

1. Contract between the importer and exporter. Shipment of goods.

2. Sending documents to the presenting bank. The remitting bank transmits these documents to the

customer's bank.

3. Delivery of documents to the client. The presenting bank delivers the documents to the buyer.

The customer can take the goods.

4. Payment is made by the customer.

BUYER EXPORTER

REMITTING

BANK

PRESENTING

BANK

Documents

Deliver

Documents

Deliver

Documents

Deliver

Payment

Payment

Payment

Page 33: Tushar Yemdey (91)

Page 32 of 53

Page 34: Tushar Yemdey (91)

Page 33 of 53

Page 35: Tushar Yemdey (91)

Page 34 of 53

Ratio Analysis of ESSAR STEEL PVT. LTD.

Working Capital Ratio:

Current Assets

Current Liabilities

Years Ratio

2014 0.66

2013 0.49

2012 0.49

Interpretation: Since the working capital ratio measures current assets as a percentage of current

liabilities, it would only make sense that a higher ratio is more favorable. But as we can see here that

the WCR is less than 1 which is not good for the company. It shows the company isn't running

efficiently. The ideal WCR is 2:1.

Return on Assets:

Net Profit

Avg. Total Assets

Years ROA

2013-14 27.80%

2012-13 33.88%

Interpretation: This ratio helps both management and investors see how well the company can convert

its investments in assets into profits. The ROA of the company is going down which is not a good sign

for the company.

Page 36: Tushar Yemdey (91)

Page 35 of 53

Net Working Capital:

Current assets – Current Liabilities

Years Ratio

2014 - 4335.99

2013 - 8554.71

2012 - 8238.52

Interpretation: A negative net working capital shows creditors and investors that the operations of the

business aren’t producing enough to support the business current debts. If this negative number

continues over time, the business might be required to sell some of its long-term income producing

assets to pay for current obligations. But as we can see that the company is moving towards the positive

NWC which is good for it.

Debt Ratio:

Total Liabilities

Total Assets

Years Ratio

2014 0.84

2013 0.85

2012 0.78

Interpretation: For calculating debt ratio 0.5 reasonable ratio. But Essar debt ratio has been increased

from 2012-14, i.e. 0.84 in 2014 which shows that Essar is having more than 50% of liabilities as

compare to its total assets. This gives you an idea of less stability with less potential longevity.

Return on Equity Ratio:

Total Assets

Shareholder’s Equity

Years Ratio

2014 1.69

2013 2.15

2012 4.72

Interpretation: Investors want to see a high return on equity ratio because this indicates that the

company is using its investors' funds effectively. But from 2012-14 the company returns on equity is

continuously reducing that indicates the company is not utilizing investors fund effectively

Page 37: Tushar Yemdey (91)

Page 36 of 53

Pre-shipment Credit in Foreign Currency

PCFC facility is granted to exporters in Foreign Currency for domestic and imported inputs of exported

goods at LIBOR related rates. This is an additional window for providing pre-shipment credit to Indian

exporters at internationally competitive rates and applicable to only cash exports.

The spread for pre-shipment credit in foreign currency will be related to the international reference rate

such as LIBOR/EURO (6 months). The lending rate to the exporter should not exceed 200 basis points

over LIBOR/EURO, excluding withholding tax.

Banks may collect interest on PCFC at monthly intervals against sale of foreign currency

It’s a foreign currency a/c of a company in which money is kept in foreign currency like USD, EURO

etc. when an organization is having this a/c they can receive the payment in foreign currency without

converting it in Rupees. And when importing material they can make payment direct through this in

their currency.

This is mainly use when the amount is huge. If you convert the currency in Rupees than bank applies

some charges for converting the currency. By transferring direct to the foreign currency a/c there is no

need to pay the bank charges.

Period of Credit The PCFC will be available for a maximum period of 360 days. Any extension of the credit will be

subject to the same terms and conditions as applicable for extension of

Rupee packing credit and it will also have additional interest cost of 200 basis points above the rate for

the initial period of 180 days prevailing at the time of extension.

Further extension will be subject to the terms and conditions fixed by the bank concerned and if no

export takes place within 360 days, the PCFC will be adjusted at T.T. selling rate for the currency

concerned.

Disbursement of PCFC: Normally it is in one lot but can also be customized as per customers

need. The disbursement amount can be converted to INR to enable exporter to pay domestic suppliers.

Benefits

• Lower interest rates as compared to domestic interest rates

• PCFC can be made available to cover both domestic as well as imported inputs of the exported

goods

Page 38: Tushar Yemdey (91)

Page 37 of 53

Guidelines

• PCFC can be availed of in USD, GBP, JPY and EUR currencies

• Available only for export up to 360 days tenor and on cash basis (i.e. not consignment payment

terms)

• Cost of funding is LIBOR + margin not exceeding 200 basis point per annum.

• PCFC can be availed for a maximum period of 360 days for amount not exceeding the FOB

value of the goods

• Cross-currency liquidation of PCFC is also permitted and forward contract may also be booked

for the same, but only up to the date of presentation of documents payment by the project

authorities whichever is earlier

• Other regulatory and procedural aspects are similar to those of rupee Pre-shipment Finance

Page 39: Tushar Yemdey (91)

Page 38 of 53

Industry Overview

ESSAR STEEL

We are a fully integrated flat carbon steel manufacturer – from iron ore to ready-to-market products –

with a current capacity of 14 million tons per annum (MTPA). Our products find wide acceptance in

highly discerning consumer sectors such as automotive, white goods, construction, engineering and

shipbuilding.

ESSAR Steel is one of India's largest exporters of flat products, exporting to the highly demanding US

and European markets, and to the growing markets of South East Asia and the Middle East.

A number of major client companies have approved our steel for their use, including Caterpillar,

Hyundai, Swaraj Mazda, the Konkan Railway, Maruti Suzuki, Rolex and Mitsubishi. ESSAR Steel has

acquired extensive quality accreditations and our lean team gives us one of the highest productivities

and lowest manpower costs among steel plants internationally.

Vision We will be a respected global entrepreneur, through the power of Positive Action.

Mission

We are committed to innovative growth through our personal passion, reinforced by a professional mindset,

creating value for all those we touch.

Core Values

Maintain integrity at all times

Satisfy internal and external customers

Facilitate all-round excellence

Promote quality

Continuously innovate and create

Explore growth opportunities in new technologies

Constantly focus on cost reduction

Page 40: Tushar Yemdey (91)

Page 39 of 53

SEAMLESS INTEGRATION A major strategic advantage is our high level of forward and backward integration. We are totally

integrated – from raw material to finished products – adding value at every stage of the manufacturing

process. Our areas of operation include:

Iron ore beneficiation We have an 8 MTPA plant at Bailadilla (Chhattisgarh) and a 12 MTPA plant at Dabuna (Odisha), both

strategically established to leverage the rich iron ore deposits of the respective states. The plants pump

the iron ore slurry to ESSAR Steel pellet plants at Visakhapatnam (Andhra Pradesh; 267 km pipeline)

and Paradip (Odisha; 253 km pipeline) respectively.

Pelletization We have an 8 MTPA Pelletization plant at Visakhapatnam and a 6 MTPA pellet plant at Paradip, both

of which provide vital raw material to our steel plant at Hazira (Gujarat).

Iron and steel We have a fully integrated world-class facility at Hazira, housing the world's fourth largest single-

location steel plant. It has a steel-making capacity of 10 MTPA, holds ISO: 9001:2000, IS 9002 and

TUV, and ISO 140001 certification and is India Chiller Energy Efficiency Project (ICEEP) Protocol

compliant.

The facility also houses a 6.8 MTPA sponge iron plant (the world's largest gas-based sponge iron plant

in a single location); a 1.5 MTPA plate mill (the largest in India); a 0.6 MTPA pipe mill with internal

and external coating facilities of up to 2 million square meters annually; and a 1.4 MTPA cold rolling

complex comprising two galvanizing lines, a batch annealing furnace and a skin pass mill.

Steel processing We have a downstream capability hub at Pune (Maharashtra),which houses a 0.6 MTPA cold rolling

plant, a 0.5 MTPA galvanizing plant, a 0.4 MTPA color coating plant, and a 0.65 MTPA pickling line.

Steel distribution ESSAR Steel is the first steel company to set up an end user distribution chain for steel products under

the brand names ESSAR Hypermart and ESSAR Express mart. Hypermart is the world's largest steel

retail chain with a network of over 375 retail outlets across India, Indonesia, Nepal and the Middle

East.

ESSAR Steel's processing and distribution facilities are the largest in India with an aggregate annual

capacity of 4 million tons from its facilities in Pune (Maharashtra), Hazira (Gujarat), Bahadurgarh

(National Capital Region), Chennai (Tamil Nadu), Bhuj (Gujarat) and Dubai (UAE).

Page 41: Tushar Yemdey (91)

Page 40 of 53

INTERNATIONAL PRESENCE

ESSAR Steel Algoma, Canada

Established in 1901, ESSAR Steel Algoma is a fully integrated steel producer based in Sault Ste. Marie

(Ontario). With a current production capacity of 4 MTPA, the plant specializes in providing total steel

solutions to North American flat roll customers.

PT ESSAR Indonesia

PT ESSAR located in West Java (Jakarta), is Indonesia's largest private sector flat products company,

with a domestic market share of 35 per cent and a history of process and product innovation.

ESSAR Steel Minnesota LLC, USA

ESSAR Steel has established a 6 MTPA integrated pellet plant on the Mesabi iron range in north-east

Minnesota, along with a concentration plant and direct reduced iron plant.

Page 42: Tushar Yemdey (91)

Page 41 of 53

ESSAR POWER

Essar Power, amongst India's largest power generation companies in the private sector, has a total

installed generation capacity of 3,910 MW

Essar PowerEssar Power is one of India's leading private power producers with a 14-year operating

track record. The company's power business currently has seven operational power plants in India and

one operational power plant in Algoma, Canada, with a total installed generation capacity of 3,910

MW. This capacity is increasing to 6,700 MW.

Essar Power — Hazira (515 MW) Commissioned in October 1997, the Essar Power-Hazira power plant is a multi-fuel (naphtha, high-

speed diesel, natural gasoline liquid and/or natural gas) combined-cycle power plant located near the

Essar Steel facility in Hazira, Gujarat.

Essar Steel and GUVNL, the Gujarat State power utility, purchase 215 MW and 300 MW of the power,

respectively. They are responsible for providing the fuel required at the power plant to generate the

power.

Vadinar Power — Jamnagar (120 MW) The Vadinar Power power plant, located at the Vadinar refinery complex, is one of the Vadinar

refinery's captive power and steam co-generation plant. The plant is a 120 MW refinery residue-based

multi-fuel, captive, co-generation plant, with capacity to generate 77 MW of power and 230 tph of

steam.

Essar Oil provides the fuel required at the power plant to generate the power and steam for the power

plant's operations.

Bhander Power — Hazira (500 MW) The Bhander Power-Hazira plant, located in Hazira, Gujarat, is a natural gas-fired combined-cycle

captive power plant. The plant was commissioned in 2006 and commenced full commercial operations

in October 2008.

Essar Steel and other Essar Affiliated Companies are responsible for providing the natural gas required

by the Bhander Power-Hazira plant, and in turn take the power generated pursuant to their PPAs with

Bhander Power.

Page 43: Tushar Yemdey (91)

Page 42 of 53

Algoma Power Plant — Canada (85 MW) Essar Power (Canada) (formerly Algoma Energy LLP) owns and operates the Algoma Power Plant in

Ontario, Canada. This 85 MW co-generation plant was commissioned on June 13, 2009. The plant's

facilities include two 375,000 pound/hour boilers and a 105 MW turbine. The power plant converts

waste gases from Essar Steel, Algoma, into electricity and steam for the steelworks. And 63 MW of the

power produced is sold to the Ontario Power Authority pursuant to a 20 year power purchase

agreement which expires in 2029.

Vadinar P1 — Gujarat (380 MW) The Vadinar P1 power plant, located at the Vadinar refinery complex, is the Vadinar refinery's second

captive power plant. This plant is a 380 MW natural gas-fired combined- cycle plant. This plant was

the first to be commissioned since the company's IPO in May 2010.

Essar Oil provides the fuel required at the power plant to generate the power and steam for the power

plant's operations.

Salaya I — Gujarat (1,200 MW) The Salaya I power plant, located near Essar Oil's refinery complex at Vadinar, Jamnagar district,

Gujarat, is an imported coal-fueled thermal power plant with two 600-MW generation units. Salaya I

Unit 1 (600 MW) started commercial operations from April 2012.

Coal for the plant will be extracted from Essar Energy's captive coal mine in Indonesia.

Vadinar P2 — Gujarat (510 MW) Vadinar P2 power plant consists of a multi-fuel (coal, naphtha, light cycle oil, clarified slurry oil and

furnace oil) co-generation power plant with 325 MW of power capacity and 900 tons per hour (tph) of

steam capacity. Steam from the facility will be provided to Essar Oil's Vadinar refinery and power

supplied to Essar Oil, Essar Steel and the merchant market.

Fuel for Vadinar P2 will be provided by Essar Oil and Essar Steel in line with their purchase

requirements.

Mahan I — Madhya Pradesh (1,200 MW) The Mahan I power plant is a 1,200 MW (2x600 MW) captive coal-fired pit-head power plant located

in Singrauli district, Madhya Pradesh. Mahan I Unit I began commercial operations on April 29th,

2013.

Page 44: Tushar Yemdey (91)

Page 43 of 53

ESSAR OIL & GAS

Essar Oil operates a fully integrated oil company of international size and scale

Essar Oil Essar has a global portfolio of onshore and offshore oil and gas blocks, with about 35,000 sq

km available for exploration. We have about 700,000 bpsd (barrels per stream day) of global crude-

refining capacity (Vadinar+Stanlow). In marketing, the company operates a network of over 1,400

retail outlets across India, with another 600 under various stages of commissioning.

Global exploration portfolio Essar's exploration and production business has 2.1 billion barrels of oil equivalent of reserves and

resources. Of this, approximately 150 million barrels are 2P and 2C resources, 1 billion barrels are

prospective resources and 1 billion barrels are un-risked, in-place resources.

Largest CBM player in India We have CBM acreage of over 2,700 sq km in India, which gives us the largest CBM acreage in the

country. Our CBM block in Raniganj is close to commercial production and has signed customer

contracts with several companies.

Large refining capacity We have a 20MTPA refinery at Vadinar in Gujarat, which started commercial production on May 1,

2008. With state-of-the-art technology, it has the capability to produce petrol and diesel that meets the

latest Euro IV and Euro V emission standards.

The refinery produces LPG, Naphtha, light diesel oil, Aviation Turbine Fuel (ATF) and kerosene. It has

been designed to handle a diverse range of crude — from sweet to sour and light to heavy. It is

supported by an end-to-end infrastructure setup, including SBM (Single Buoy Mooring), crude oil

tanker facility, water intake facilities, a captive power plant, product jetty and dispatch facilities by both

rail and road.

Our refinery we have made substantial investments in installing the most advanced equipment and units

in our refinery. At 97m, the refinery's crude column is Asia's tallest and capable of enhanced separation

of petroleum products. The DHDS reactor is also the largest in its category, capable of producing Euro

V-compliant diesel. The refinery is, in fact, unique in its complexity and its ability to produce value-

added products. All units have operated many notches over their rated capacities with the crude unit

achieving over 14 million tonnes (300,000 bpsd) in the very first year of operation. This is a first for

Page 45: Tushar Yemdey (91)

Page 44 of 53

any refinery in India. In 2012, the refinery capacity was expanded to 20 million tonnes, with an

increase in its complexity from 6.1 to 11.8 on the Nelson index, making it India's second largest single-

location refinery and amongst the most complex globally.

To date, our Vadinar refinery has successfully processed more than 75 varieties of crude from across

world, including some of the "toughest crudes".

In 2011, Essar acquired the Stanlow Refinery from Shell, which is the second largest refinery in

England. The Stanlow Refinery, with a capacity of 296,000 barrels per day, lies near to Liverpool in

northwest England, on the south bank of the Manchester ship canal. It supplies approximately 15 per

cent of the country's transport fuel requirements.

Retail and Marketing Essar Oil serves retail customers in India through a modern, countrywide network of over 1,400

operational retail outlets and about 600 more under various stages of commissioning. We were the first

private Indian company to enter petro-products retailing, looking beyond urban markets and reaching

out to consumers in India's heartland.

Tie-ups with other Indian oil marketing companies gives Essar Oil access to the products and the right

to use their terminals and facilities for placing and marketing our products. This gives the company

pan-India presence with more than 30 supply locations.

We offer a wide range of products to bulk customers in the industrial and transport sectors. Essar Oil

has product off take and infrastructure sharing agreements with all the oil PSUs (the state-owned public

sector units), namely Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd

(HPCL) and Indian Oil Corporation (IOCL). We have received approvals to supply ATF to the Indian

Armed Forces.

Page 46: Tushar Yemdey (91)

Page 45 of 53

ESSAR SERVICES

Essar offers a wide portfolio of services that cater to diverse sectors that include shipping, business

process outsourcing, telecom and realty

SHIPPING Essar Shipping Limited's integrated business model provides end-to-end logistics, shipping and oilfield

services to its customers in a very cost-effective manner

BPO Aegis is Essar's BPO arm. It serves Fortune 500 companies across 10 countries through 47 delivery

centers

TELECOM Essar has over 900 telecom retail outlets in India

REALTY Set up in 2007, Equinox, our realty business is led by a strong team of experienced professionals with

extensive cross-functional and technical.

Page 47: Tushar Yemdey (91)

Page 46 of 53

Methodology

Methodology for the project “Trade Finance” includes buying & selling of the goods or services. For

every industry buying & selling of goods or services is very important. In this my guide Mr. Sanjay

Rohit (Manager) took 1hr class on every Saturday to explain me about the trade finance. Whatever he

explains me I have to notice it for a week and if any doubt came I may asked with him or with other

employees who are working in a trade finance department.

During my internship I have gone to every employees working there to know about the work they do.

They show me the documents which are used in trade finance; they explain me the working of those

documents. I saw the documents and study the same. I have gone through the making of documents and

reading of it. I came to know the work of every documents and its importance.

As I know about the documents so I started helping them in making documents. While making

documents I introduce a new method of making some of the documents, which is very helpful to them.

While introducing the new method one of the employees helped me and gave me the documents to

bring out the new form of making it. And with the help of him I successfully introduce the new way

and my guide accepted it and now in trade finance department the method I introduce is, employees are

working on it.

During the internship, I asked them the balance sheet of 2years and have done the ratio analysis of the

company.

Page 48: Tushar Yemdey (91)

Page 47 of 53

Tabulation and Finding

Findings As my topic is Trade Finance, so I was learning about the export documentation. In which various

types of documents are prepared according to the requirement of importer.

When the documents were getting prepared by one of the employees I found out that there was one

document called Certificate of Origin which was prepared in MS-EXCEL in an organization from the years. To set

the alignment of this document according to the Letter Head of COO (Certificate of Origin) it takes around 20-

30 mins. And to check the alignment right or wrong they take 4-5 print out in a blank paper, which I thought

that, its time taking and waste of papers. After that the idea came to my mind to do it in a MS-WORD with the

help of watermark. I asked them the scan copy of that Letter Head, and then watermark it in to the MS-WORD

with the help of one of the employee. This conversion helps them to do work fast & easy.

Page 49: Tushar Yemdey (91)

Page 48 of 53

Results

After converting their MS-Excel format to MS-Word the results were:

Increase in efficiency of employees.

Saved the time of employee.

Saved the papers.

The alignment was so proper that every contain was in their proper place, by which importers

think that in ESSAR documents are prepared in a proper format.

Page 50: Tushar Yemdey (91)

Page 49 of 53

Scope for future improvements

Doing export for every country is very important to grow the economy of both the countries. As the

development is there in huge amount so demand of steel is also increasing day by day.

With each day the environment changes in a company, so a financial manager needs to able to

cope with these changes in a positive direction.

Don’t get bafflegab, but try to be original each time we look at things and do it better possible

way each time.

Being Assertive and knowing to ask Right Questions to right persons speed up the progress on

the learning curve

Conclusion

This project has explained the need for trade finance and introduces some of the most common trade

finance tools and practices. This paper presents a unique framework that explains the different nature of

international as well as domestic trade. It also explains the risk which is there in international and

domestic trade and how to reduce the risks by using the instruments like Letter of Credit, Bank

Guarantee, buyer’s credit etc. these documents are issued by the bank or financial institution and they

became the third party guarantor while doing a trade.

But, banks or financial institution only deals with the documents not with the goods or services.

Trade finance signifies financing from trade, and it concerns both domestic and international trade

transaction. A trade transaction has a seller of goods or services as well as a buyer. Various

intermediates such as banks or financial institutions facilitate these transactions by financing the trade.

Page 51: Tushar Yemdey (91)

Page 50 of 53

Recommendation

To convert the LC in MS-Word, so that the discrepancies will be less.

The company should focus on the tight management of working capital. Accounts receivable,

and accounts payable are of specific importance.

Company can improve their working capital management and can be able to free up cash and

thus can, reduce their dependence on outside funding

The company should develop relation with the people associated with it and take frequent

feedback from them so that they can work more efficiently.

Limitation of study

Interns were not allowed to take their personal laptop nor allotted with a desktop in company.

Difficulties in getting information from my guide as being on very higher post in the company

he was very busy in his schedule.

Page 52: Tushar Yemdey (91)

Page 51 of 53

Appendices

HBI Hot Briquette Iron

HRC Hot Rolled Coils

CRC Cold Rolled Coils

MTPA Million Tonnes Per Annum

SAP System Application and Product

MW Mega Watt

GSM Global System for Mobile

JV Joint Venture

TPA Tons Per Annum

BPO Business Process Outsourcing

CVM Customer Value Management

IT Information Technology

ISO International Standard Organization

WCM Working Capital & Management

WC Working Capital

RM Raw Material

WIP Work in Progress

FG Finished Goods

ACP Average Collection Period

CC Cash Credit

EPC Export Packing Credit

LC Letters of Credit

BG Bank Guarantee

BC Buyers Credit

PCFC Packing Credit in Foreign Currency

Page 53: Tushar Yemdey (91)

Page 52 of 53

Bibliography

www.essar.com

www.essarsteel.com

www.steelindia.com

www.iccindiaonline.org

www.companiesinindia.net

www.howtoexportimport.com

www.eximguru.com